Fresh, Fast, and Local: Online Grocery Shopping is Coming

Shoes? Check. Computer gear? Check. Clothes? Flatware? Hot tubs with built-in TVs? Check, check, and check. There’s almost nothing these days that we don’t buy online. But there is one area where the local brick-and-mortar store still reigns supreme: grocery shopping.

When it’s time to stock the fridge, the vast majority of us still do it the old fashioned way. We trek out to the store, walk up and down the aisles, and fill up physical rather than virtual shopping carts. But just maybe, that’s about to change. A number of retailers are experimenting with online groceries, and a growing number of consumers are ready to buy.

A Growing Trend

Even as we buy everything else with a mouse, when it comes to selecting fresh produce, meat, and other food items, most of us still prefer to do it in person. But a 2012 Nielsen survey of consumers in 56 countries suggests that opinions are changing:

The number of people stating they intend to buy food and beverages online grew by 44 percent over the last two years.

More than one-quarter (26%) of global respondents said they planned to purchase food and beverage products via an online connected device in the next three to six months—a jump from 18 percent reported in 2010.

And just last month, online coupon aggregator CouponCabin.com published a survey showing that more than a third of U.S. adults shop for groceries online or plan to, and that nearly four in ten wish their local grocery store offered online shopping.

The interest is obviously there, and retailers are exploring ways to meet it. Cathy Roberson recently surveyed the market in Transport Intelligence:

The European online grocery market is growing and is quite competitive. Even transportation and logistics provider DHL entered the online grocery shopping market in 2012 by acquiring a stake in German online grocer Handeslblatt. According to its CEO, “We plan to deliver groceries and household products in the whole of Germany by 2016.”

Today, the market is mostly regionally focused. Even Amazon’s grocery delivery service is only available in the state of Washington. It deploys a fleet of trucks from its refrigerated warehouse just north of Seattle and delivers to about 80 zip codes….

Other options include a few online-only grocers that still exist from the dot com days of the late 1990s. For example, Netgrocer is a nationwide online grocer with delivery generally 3-7 days utilizing FedEx.

Making it Work

In a world where you can buy anything from live crickets to your own private island online, the idea of buying groceries is not exactly revolutionary. So why is the trend taking so long to take hold? Because when it comes to groceries, it’s very hard to introduce the economies of scale that benefit other e-commerce models.

To compete on price, online grocers must settle for extremely slim margins. But since fresh food can spoil quickly, they also need to fund major storage and distribution infrastructure everywhere they wish to sell.

Amy Martinez described some of the difficulties in the Seattle Times last week, while profiling Amazon’s online grocery experiment in Seattle, AmazonFresh:

Safeway sells groceries online but does not consider it a significant part of its business. Albertsons gave home delivery a go for a decade before pulling the plug in 2009.

Issaquah-based Costco Wholesale, which has a fast-growing e-commerce business, ruled out home delivery of fresh foods as too expensive.

“We’ve looked at home delivery, and we don’t think it works. Not with the slim margins we have,” said Costco Senior Vice President Joel Benoliel.

At the same time, analysts believe the market is ripe for growth. Martinez reports that research firm IBISWorld projects that, “over the next five years, online grocery sales will grow at an annual rate of 9.5 percent to $9 billion.”

So how will online grocers overcome the barriers and capitalize on that opportunity? Many are finding that the solution is to go local. AmazonFresh in Seattle is a great example. In addition to delivering standard groceries, the service offers fresh produce, fish, meat, and prepared foods from dozens of local shops, boutique markets, and popular Seattle restaurants.

Another great example is Good Eggs. Instead of offering major grocery store brands, Good Eggs focuses on locally produced food from small farmers and local vendors—a kind of online local farmer’s market. Alexandra Chang profiled the company in Wired last month:

Good Eggs, which launched last summer as the Etsy of local food, is expanding in a bid to become the Amazon of local food.

The San Francisco-based company launched a new web platform that lets users select items from local vendors and farmers and combine them in a single order ready for delivery or pickup. That’s transforming Good Eggs from a web stand for multiple vendors to a central hub for purchasing and delivering local food.

It’s too early to tell which online grocery models will ultimately prevail. But it’s certainly one of the biggest stories in e-commerce.

Have you used an online service to buy groceries? What was your experience like? If you wouldn’t buy groceries online, why not? Let us know in the comment section.

We'd love to hear from you! To earn points and badges for participating in the conversation, join Cisco Social Rewards. Your comment(s) will appear instantly on the live site. Spam, promotional and derogatory comments will be removed.

I am looking forward to buying groceries online. Out of all the uncertainty in the market it looks as though good egg is doing pretty well by just giving it as a option. My fear is that it turns into the global mcdonalds where they screw over you food. I just need a basket of fruit.

I'm looking forward to it too, especially a service like Good Eggs. Too bad there isn't anything like this where I am, in Ann Arbor, Michigan, even though there is a very large local food and CSA movement here. (Hopefully it's just a matter of time...) For me, that's probably the only way I would buy produce and meat online--from the local farms around here that I know produce fantastic food. I would order the rest of my groceries online, but I'd have a hard time trusting my local supermarket to pick out my fruit and vegetables for me.

I live in Jersey in the Channel Islands, and despite it being 9x5 miles, we are lucky enough to have a choice of online supermarkets. I don't want to name drop but my wife orders all our groceries from valleyfoods.je they're solely Jersey based and from what I know are originated from a Farm shop business. Their service and quality of food is excellent for veg, meat and packaged items. Orders in by 11am will get to you the same day. Maybe the big guys could learn from a small company in terms of process. But maybe it is not a model that can easily scale, hence the relatively slow availability of the service elsewhere.
The only issue we've had was a thumbnail of a jar of mustard we ordered was a bit misrepresented turned out to be a 2 litre jar! That's a lot of mustard! :)

That's an interesting point, and I wonder if that distinction between the big guys and the little guys is really where the rubber meets the road. Maybe quality online grocery shopping is just going to be more viable for smaller markets and vendors, who are more concerned with building strong long-term relationships with their customers, rather than the giant supermarkets who are mostly about competing on price.
Thanks for sharing your experience!

Some of the individuals posting to this site, including the moderators, work for Cisco Systems. Opinions expressed here and in any corresponding comments are the personal opinions of the original authors, not of Cisco. The content is provided for informational purposes only and is not meant to be an endorsement or representation by Cisco or any other party. This site is available to the public. No information you consider confidential should be posted to this site. By posting you agree to be solely responsible for the content of all information you contribute, link to, or otherwise upload to the Website and release Cisco from any liability related to your use of the Website. You also grant to Cisco a worldwide, perpetual, irrevocable, royalty-free and fully-paid, transferable (including rights to sublicense) right to exercise all copyright, publicity, and moral rights with respect to any original content you provide. The comments are moderated. Comments will appear as soon as they are approved by the moderator.